Media economics after disruption

6. Media economics after disruption

How to pay for the new modes of storytelling in the new media economy remains the most challenging issue. Good journalism has always required subsidy and readers and viewers have never paid directly for all the news and information they consume. Advertising has been the primary source of subsidy for journalism, and the collapse of print advertising that has crippled the traditional business model for large media

organisations continues apace, particularly in the US. 97 As the Columbia University report concludes, “what is clear is that the model long adopted by the majority of news

outlets —a commercial entity that subsidizes the newsroom with advertising dollars—is in trouble.” 98

Digital advertising is growing, but its benefits are not readily available for news organisations. Good rates for print advertising have depended, as discussed above, on scarcity. But as digital platforms become more important, advertising rates are reduced

because “the fundamental trade on scarcity of space cannot hold value in abundant space.” 99 While in America digital advertising has grown slowly, and now comprises

about 15% of total newspaper ad revenue, the growth does not come close to compensating for losses from print advertising. In 2012 16 print ad dollars were lost for every digital ad dollar gained. That ratio of decline is going to continue because the huge range of new places to advertise – now including sites like Facebook and Twitter – will continue to expand. 100 These are developments that also affect markets beyond

North America. It all adds up to a simple conclusion: journalism has to find new sources of subsidy.

To this end, media organisations have turned most commonly to readers and viewers for payment, a strategy often discussed in terms of “paywalls.” Many have cited the apparent success of The New York Times “meter” which allows readers to access 10 articles/month before asking them to subscribe, and on a couple of measures it has

worked well. 101 Digital subscribers have increased quickly to 640,000, and the organisations circulation revenue “now exceeds its advertising revenue, a sea change

from the traditional revenue split of as much as 80% advertising dollars to 20% circulation dollars.” 102 However, that sea change says as much about the collapse in

advertising revenue from more than US$ 2billion in 2007 to US$888 million in 2012. 103 When the organisation has been able to report a profit overall, the figure has been advertising revenue from more than US$ 2billion in 2007 to US$888 million in 2012. 103 When the organisation has been able to report a profit overall, the figure has been

Direct reader fees for digital properties are unlikely to exceed 3-5% of overall web users. This low take-up leads a number of people to argue this is a moral issue, although this is not necessarily the most helpful approach for developing a business strategy. 105 While media organisations would unquestionably be better off if more web users subscribed more readily, we need to understand the dynamic behind the low conversion rate from the multitude of web users to a small numbers of subscribers.

The answer lies in the fact that not all web users consume information in the same way, and we need to distinguish between “casual” and “power” consumers of information. 106

More than three-quarters of the traffic to the top 25 American news sites came from casual users who visited just once or twice a month. In most cases they arrived via a link or a search result, read one piece, and moved on to another news source. In

contrast, “power users” – people who came to the same news site more than ten times each month, spending more than an hour each month on the site – comprised on

average only 7% of the total web readership. 107

In other words, because of the way people access information online – moving quickly amongst diverse online resources – the loyal, engaged audience is only a very small component of the mass audience. 108 This is another instance of a “power law” on the Internet. 109 People who are willing to pay can be found within such a loyal, engaged

audience, and while their money will be a welcome addition to the balance sheet, the income is not enough to reverse the decline in overall revenue. 110 This also means that

photojournalists or multimedia producers, who wait for direct reader/viewer fees to enable large media organisations to return to their role of beneficent editorial

paymasters, are going to be severely disappointed. 111

The relationship between casual and power web users is important background for thinking about what counts as mul timedia’s criteria for success, which includes the issue of analytics. In print media that is usually discussed in terms of circulation and readership of the newspaper or magazine as a whole, with the nature of print consumption making collective data on engagement with individual stories difficult to gather. The w eb offers greater potential for detailed tracking of how audiences behave, and most media organizations are pursuing a range of metrics to understand how people use their platforms and stories, although there is widespread reluctance to The relationship between casual and power web users is important background for thinking about what counts as mul timedia’s criteria for success, which includes the issue of analytics. In print media that is usually discussed in terms of circulation and readership of the newspaper or magazine as a whole, with the nature of print consumption making collective data on engagement with individual stories difficult to gather. The w eb offers greater potential for detailed tracking of how audiences behave, and most media organizations are pursuing a range of metrics to understand how people use their platforms and stories, although there is widespread reluctance to

that followed the publication of a story. Respondents indicated varying degrees of attention being paid to these measures in determining criteria for success, but as one

person wrote, “It’s hard to quantify how effectively you’ve moved, informed or entertained your audience, but that is ultimately the goal. ”

With regard to the economics of journalism, the news is not all bleak. From De Correspondent and De Nieuwe Pers in the Netherlands, to Mediapart in France, and ProPublica, Matter and The Magazine in the US, there is no shortage of

experimentation with new ways of producing and funding good journalism. 112 To this end, a global study of 69 profit-making journalism start-ups analysed their business

models to see what was working for them. 113 They found that sustainability came, not from some previously unknown, magical revenue stream, but from the way the

successful enterprises had diversified their income by connecting existing sources with other resources in new ways. The study concluded that “the five most common mechanisms in use for revenue were…advertising, paying for content, selling data and technology, events, freelancing or consulting. ” This is illustrated in more detail in the graphic below that offers a comprehensive summary of options adaptable for different realms. However, “there was no single, one-size-fits-all solution but each news provider has to rely on a combination of revenue sources in order to grapple with fragmented media markets, social connectivity and the internationalization of news

production.” 114

(Source: “Can You REALLY Make Money Blogging? [7 Things I Know About Making Money from Blogging], 28 November 2012, http://www.problogger.net/archives/2012/11/28/can-you-really-make-money-blogging- 7-things-i-know-about-making-money-from-blogging/ ).

Diversifying their income through indirect sources of revenue in order to keep subsidising journalism is also practiced by a number of major media organisations. For example, The Atlantic operates a successful events business, using its brand name to run conferences in Washington, DC, New York City and Aspen. This revenue stream has been growing 30% annually; events now make up 16% of The Atlantic’s revenues, with the prospect of increasing to 20% next year. 115 This has worked on a smaller scale

for IDFA DocLab, as well, with live screenings of interactive documentaries. While it might seem counterintuitive to ask people to pay to watch producers show their online projects, sizeable audiences have done so and made these events popular and successful. This demonstrates that when something is scarce and non-fungible (i.e. the live presence of the producer) there is a demand for it.

How do these experiences and examples relate to the all-important question of how to fund visual storytelling?

Diversifying income is not unfamiliar to the photography world. Looking at some of the independent multimedia producers operating today – Bombay Flying Club and

MediaStorm among them – they succeed through a mix of client commissions (including commercial, foundation, NGO, and media customers) training workshops and materials, software provision, and licensing editorial projects. Partly through choice, NGO and other non-profit sector clients provide the largest revenue stream, often

paying more for a project than editorial clients. 116 Producers in some countries, like Canada and France, can profit from government cultural subsidy programmes and institutions to get back large projects.

Editorial clients are still looking for high quality work, and in rare cases, producers have gained up to a third of their income from them. However, the editorial market represents a much smaller revenue stream for most independent producers. At our seminars, a number of them confirmed that only a small part their work (10% or less) was commissioned directly by established media organizations. When such commissions were undertaken, the media organizations had approached individual image-makers directly.

The low level of editorial commissions stems from the fact media organisations overwhelmingly chose to produce their content using in-house salaried staff teams. Most organisations responding to our questionnaire said that 90% to 95% of their work was internally produced, with two organisations reaching a ratio of 70:30 for internal to /external productions. This approach seems likely to continue. Even a magazine like The New Yorker has hired a video editor/producer, and when The Atlantic outsources productions, they hire a specific company like NowThis News to produce short stories

in their distinctive style. 117

This modus operandi means the freelance market for multimedia is small and specific. When media organisations use freelancers they are tasked to produce assets (audio, video etc.) that are then edited internally. Of course, there are exceptions. There are individuals who are regularly contracted by major news organisations to produce complete stories, the GlobalPost relies on freelancers, and Storyhunter functions as a

clearinghouse connecting professional video journalists with global digital publishers. 118

Freelance rates are generally low. Both The GlobalPost and Storyhunter pay around US$1000 for a completed 3-5 minute news video, which can increase a little if different versions are reedited for other outlets. Taking the time needed to shoot and produce a story, as well as the lack of a publication guarantee, a freelancer is unlikely to gain a viable monthly income from this level of pay. Participants at our seminars confirmed Freelance rates are generally low. Both The GlobalPost and Storyhunter pay around US$1000 for a completed 3-5 minute news video, which can increase a little if different versions are reedited for other outlets. Taking the time needed to shoot and produce a story, as well as the lack of a publication guarantee, a freelancer is unlikely to gain a viable monthly income from this level of pay. Participants at our seminars confirmed

This means that editorial work has to be pursued differently. Editorial work is an essential element in a freelancer’s portfolio and supports a strategy of diversified sources of income. Editorial stories are often high quality work that showcase a

producer’s ability, and function as an indication of the sort of stories new clients can expect. Editorial stories can also indirectly drive revenue if related content can be

purchased. For example, Magnum in Motion found multimedia packages on photographers like Paul Fusco were driving increased book sales.

Finally, the greatest editorial opportunity is to look for editorial work beyond the traditional editorial market. That involves, firstly, thinking about how photojournalism

might report and produce stories for television broadcasters or public radio networks. 119 Secondly, it means seeking out organisations (either commercial or non-profit) that are

taking charge of their own story and want to produce content but need to outsource the visual journalism.

Offering users the opportunity to pay for unique, high quality content directly is now possible. The power law dynamic that means engaged users are a small fraction of the overall number interested in stories suggests this is unlikely to be a large revenue stream initially, but as mechanisms to ease the friction of paying come into being, new opportunities will emerge. For online video, YouTube subscription channels, Vimeo-on- Demand , Vimeo’s Tip Jar , and personal video on demand through Distrify – are

existing options. 120 MediaStorm’s “pay per story” model did not generate significant income, but it showed a subset of their audience was willing to pay to watch

MediaStorm stories.

Making content, especially online video, embeddable without charge on other people’s sites is a viable strategy if the embedded content can generate revenue to the creator. In this context, MediaStorm’s custom video player is an interesting development (especially as it means the production studio has also become a software company). It allows MediaStorm to distribute their stories across the web and to benefit from others hosting and reframing MediaStorm’s content (for example, through being playable on Facebook) . The player’s features include advertising and transaction capability that travels with the embedded video. This makes it possible for MediaStorm to monetise Making content, especially online video, embeddable without charge on other people’s sites is a viable strategy if the embedded content can generate revenue to the creator. In this context, MediaStorm’s custom video player is an interesting development (especially as it means the production studio has also become a software company). It allows MediaStorm to distribute their stories across the web and to benefit from others hosting and reframing MediaStorm’s content (for example, through being playable on Facebook) . The player’s features include advertising and transaction capability that travels with the embedded video. This makes it possible for MediaStorm to monetise

VII The Magazine (which uses iFrame to place its content on its media partner’s sites) is another example of digital distribution where the creator gets to keep the revenue. They both use the free distribution

capacity of the web to get their stories placed where the audience is while earning revenue off that placement. And as Panos Pictures has found, videos that are freely embeddable across the web receive approximately five times as many hits as those that are not embeddable.

It will take considerable experimentation to develop new revenue streams than can subsidise visual storytelling. Whatever is going to work, it will rely on the ability to leverage the web’s ecology: understanding the relationship between scarcity and abundance, without confusing it with the relationship between value and price. Many content producers price their work on the assumption that it is scarce and has unquestionable value, and inefficient modes of distribution have supported that. But because the web has made many things abundant, charging scarcity prices is not easily sustainable even for things that are still perceived to have value.

This brings us back to the importance of fungibility. Something is fungible if it can be substituted by something else. A breaking news story is fungible because there are a number of credible sources that can be substituted for each other. A music track or a specific story is not fungible because if you are a fan who wants only a track by a particular band, or a story on a particular subject, they cannot be replaced by music or

a story from others or about others.

Scarce items are not fungible. Abundant items are. If you produce something that is unique and not found elsewhere, you can resist the inevitable free endpoint. If you produce something that is abundant and can be replaced by something else, then you will not be able to charge scarcity prices for it. People pay readily for online content that is not fungible, when it has value for them, and can be accessed easily. Daily news or spot news does not fall into that category because of the presence of credible global news sources that can be relied on to provide content at no direct cost to the user. Other forms of news, information and stories, when non-fungible and scarce, have the potential to be purchasable. In the end, quality is the most important precondition for success.